How big data and algorithms changed the face of advertising

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4 MINUTE READ

The whole of the advertising industry has been shaken up by the introduction of a fundamental technological change. Namely, big data and algorithms.

A combination of these two technologies has enabled both automated and real-time buying and selling on a scale never seen before. The way people look for and buy products has gone through an irreversible change. As a result, the very core of the advertising business model is being redefined from the ground up.

The industry is now a far cry from the consumer focus groups and boardroom brainstorms of the past. Today, advertising is a world of software, high speed networks, data, statistics, optimisation and operations research. A whole range of related disciplines are now coming together to step up to the challenge of handling huge volumes of constantly changing data. Advertising agencies that drag their feet in this new environment will not be around for much longer. In contrast, those that embrace the technological shift can expect to benefit from a diverse range of entirely new business opportunities.

The intersection of data and advertising

At present, there are several different interconnected trends feeding into one another to create this world of data. According to Wikipedia 51% of the world’s population now has access to the internet. As this percentage climbs higher year on year, the market for advertisers is constantly growing. In addition, it gives them an increasingly rich source of data to tap into.

Furthermore, the explosive uptake of smartphones has also brought in huge numbers of first-time internet users – fresh eyes for advertisers. Tech giants such as Google, Amazon, Facebook and LinkedIn have created huge pools of data that are highly valuable to businesses and advertisers. These huge platforms take care of collecting, processing and sorting the data into a coherent structure. This means other businesses can pay a fee to access the data most relevant to their market, in the hope of extracting valuable insights.

In addition to these new data pools, there are also vast seas of historical data that are a potential gold mine in the right hands. It offers insights into industry trends and buying behaviour over time. Advertisers can then correlate this historical data with “new data” to build predictive models that can accurately predict future consumer behaviour.

It’s not just the data we willing give to social media platforms that is useful, but demographic, geospatial and other metadata as well. 24/7 connectivity means each of us leaves a trail of digital footprints as we go about our day. The sheer volume and variety of all this data is astounding. The real-time insights and patterns that can be extracted from it are the foundational components of modern advertising.

There is now a booming industry of intermediary companies that harvest, analyse, interpret data in order to serve up precisely targeted ads to consumers. At every stage of the customer journey, advertisers are taking their cut for being involved in the overall management of systems which translate torrents of consumer data into highly targeted ad campaigns.

Automated advertising is smarter advertising

Programmatic advertising currently represents the cutting edge of the industry. It involves the real-time and automated buying and selling of ads with algorithms. There are now huge online marketplaces, operating behind the scenes of most websites, where software itself buys and sells advertising space. The whole process operates independent of any human input.

Most ads you see as you browse the web are inserted into predefined slots by programmatic advertising software. This technology gives advertisers an impressive degree of control over who sees an ad by specifying a number of criteria. For example, only showing them to people in Scotland during a particular time window.

The fundamental concepts of advertising haven’t changed. That is, to present the concepts, products and services in a way that connect sellers with potential buyers. What has changed, however, is that the advertisers (and sellers) must be able to harness the arsenal of real-time measurement and placement tools to focus their efforts with pinpoint accuracy and minimal cost. Being able to make use of big data, analytics and algorithms isn’t just “nice to have”, it’s essential.

As the internet transitions from an “open” and ostensibly free network to one that is ubiquitous and highly monetised, advertising has entered a new paradigm. The sheer value and growth of the online advertising market is reshaping the entire advertising industry, and the rate of change is not slowing.